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S&P Downgrades Daewoo Corp. to 'B'

24 July 1998

S&P Downgrades Daewoo Corp. to 'B'; Still Watch Negative

    TOKYO, July 24 -- Standard & Poor's today lowered its
long-term foreign currency rating of Daewoo Corp. to single-'B' from
single-'B'-plus.  The rating remains on CreditWatch with negative
implications.
    The downgrade reflects the difficult business environment surrounding
Daewoo as well as the company's worsening financial profile.  Daewoo's
construction and automobile businesses in Korea are suffering from rapidly
contracting demand under current economic conditions.  Fairly solid results
from Daewoo's machinery export trading and from the shipbuilding activities of
a subsidiary would be insufficient to offset the sluggish performance of
operations at home.  Moreover, Daewoo's continued investments in emerging
markets face greater risks in light of growing political and economic
uncertainties in the Asian region.
    Daewoo's sizable debt burden has grown as a result of the company's
aggressive investment strategy in recent years coupled with the won's sharp
depreciation in 1997. Consolidated net debt stood at Korean won (W)
24 trillion at the end of 1997.  Funds from operations covered less than
10% of net debt for the year, while pretax net interest coverage was low at
around 2.0 times.
    The rating remains on CreditWatch with negative implications, reflecting
lingering concerns about Daewoo's business and financial profile over the near
term.  As with other major Korean industrial groups (chaebol), the Daewoo
Group is taking steps to restructure its business and financial organization.
At present, however, Daewoo's success in implementing this restructuring plan
is not assured.  Meanwhile, widespread corporate sector restructuring in Korea
could sink the nation's economy into further turmoil.  In addition, Daewoo is
expected to participate in the auction of failed automaker Kia Motors Corp.
If it wins the bid, Daewoo could experience further deterioration in its
financial profile given the extremely unfavorable market for automobiles in
Korea.